Monthly Archives: December 2013

HOME INSPECTIONS

WHAT DO THEY MEAN TO YOU AS A BUYER OR A SELLER

If you are in the market to buy or sell a home you should be aware of how property inspections will affect your position, and what to expect from a legal standpoint. I want to make it clear that I am not an attorney and cannot give you legal advice. If you ever get to the point in a real estate transaction of any kind where you are not sure of your legal position please call your attorney.home inspection

These days probably about 95% to 96% of home buyers are making their offers subject to some type(s) of inspection(s). Remember, in regard to property inspections, laws and procedures may vary by location. What we will discuss here will probably be typical for most areas of the country but may differ depending on the market you are located in.

Before we get into a discussion of the specific types of inspections that are usually required by buyers let’s talk for a moment about the typical obligations of buyers and sellers when they sign a contract that requires inspections.

As a buyer, when you require property inspections as a contingency on a contract to purchase, within a certain number of days from the date of acceptance of that contract, you will have an obligation to complete those inspections and report back to the seller either requiring repairs or signing off on the contingency. Typically, 7 – 10 days form acceptance of your offer to complete your inspection and respond to the seller is pretty common in our area unless you are making your offer “subject to the sale of your house”. In most cases if you are going to respond to a seller and ask for repairs you will have to also submit a copy of the inspection report to the seller.

Sometimes inspection addendums are written such that if the buyer does not comply with these time requirements then they agree to take the property in “as is” condition. In other words the seller is relieved of any obligation to repair any defects the inspection report points out and the buyer waives their right to void the contract due to property defects. This is why it is so important to make a timely response to a seller on an inspection. The seller will typically have 3 choices when a buyer requests repairs:

1.  To make all repairs requested by the buyer
2.  To not make any of the repairs requested by the buyer.
3.  To make some of the repairs requested by the buyer.

If the seller chooses 2 or 3 above then that amounts to a counter offer from the seller to the buyer and the purchase contract is no longer considered an accepted offer but one that is now in negotiation. So, the buyer & seller negotiate until they either reach an agreement or they both go their separate ways. It’s not quite that easy but that’s it in a nut shell.

As a seller when you agree to allow the buyer to have property inspections you are subject to similar time requirements (as those requirements, which would be recited in the inspection addendum pertain to you as the seller) that may be recited on the inspection addendum. So, when you receive the buyer’s timely response you need to respond back within the time allotted you or you may be required to complete all requested repairs and waive your right to void the contract. Again, responding within the appropriate contractual time requirements is very important.

IF YOUR AGENT DOES NOT OFFER YOU A COMPLETE EXPLANTATIN OF THE INSPECTION ADDENDUM DO NOT SIGN IT UNTIL THEY DO SO. YOU NEED TO COMPLETELY UNDERSTAND WHAT THAT DOCUMENT IS AND HOW IT MAY AFFECT YOU!!!!!!!!!!!

In our next article we’ll examine the type of home inspections you should consider.

YOUR RELATIONSHIP WITH YOUR REALTOR

Recently I was doing some training on the subject of “Agency” and I got thinking that it might be a subject that may be of interest to you. So here we go!!!

“AGENCY” is the term that we use to identify the relationship that exists between us and our clients and customers when we represent them in a real estate transaction.

Prior to the early 90’s almost 100% of real estate brokerages practiced “sub agency” – a type of representation where all agents represented the seller in any given transaction. This meant that if you had your property listed with a broker and I brought a buyer to your property (who happened to be my Selling Homesbrother) that I was supposed to represent only your best interests as a seller. REALLY!!!! So I’m going to do the best job I can for you – and not my brother? I don’t think so! You can see the potential problem with this type of agency relationship.

In the early 90’s I was a member of the “Education Advisory Committee” to the Iowa Real Estate Commission. We were charged with the task of determining whether or not the real estate educational requirements for Iowa licensees were sufficient to protect the interests of the buying and selling public. After a lot of discussion it was decided, among other things, that the rules and regulations concerning “agency” in Iowa needed to be changed to protect the interests of the buying and selling public – especially the rules of disclosure.

What evolved were types of agency that would be permitted in the state of Iowa and the disclosure requirements. I will describe them briefly so you are familiar with them.

1. Single agency- a type of representation where the agent representing the buyer or seller ONLY represents the interests of their client – either the buyer or seller. So, if you were my buyer client and I was taking you to a property listed with another broker I would represent your interests only and not the interests of the seller. On the other hand, if you had your property listed with me and an agent from another brokerage brought a buyer to your property then I would be a single agent representing your interests only and I would not represent the interest of the buyer. This type of agency is used primarily when two brokerage firms cooperate – one has the buyer and one has the seller

2. Dual agency- If you listed your property with me and another agent from my company brought a buyer to your property then both I and the other agent (from my company) who is bringing the buyer to your property would represent both of you (seller and buyer) at the same time. As dual agents both I and the agent bringing the buyer to your property would have certain obligations to you and the buyer. Here are the most important ones-

If you as the seller told me that you were going to list your property with me for, let’s say $150,000.00 but you would take $140,000.00 I could not share that with the buyer or the buyer’s agent. Likewise, if the buyer told his agent that he was going to make you an offer for $140,000.00 but he would go up to $150,000.00 the agent bringing the buyer could not share that with you or me as your agent.

If there was information that you required me to hold in confidence or that I thought should be held in confidence or that I would be legally required to hold in confidence then I could not share that information with the buyer or the buyer’s agent. The reverse would hold true also.

If I or the other agent from my company representing the buyer was aware of a defect in your property that you did not want to disclose to the buyer we would be bound by law to disclose that defect.

Dual agency is typically used for in-house transactions. A dual agent’s obligation to both parties is to do everything possible, within the rules, to bring seller and buyer together and help them negotiate an acceptable agreement. Dual agency works very well until one of the agents becomes dishonest.

So what if you wanted me to represent you as a seller (list your property) but you did not want to participate in dual agency? There is a special type of agency called “appointed agency” whereby I could represent you as a seller but if a buyer wanted to come to your property through our company, then the broker would have to appoint me as your “appointed agent” and I would represent you as a single agent. This would mean that all other agents in my company, if they wanted to bring a buyer to your property, would bring their buyers as a single agent.

3. Self representation- You could represent yourself in a transaction either as a buyer or seller and I could represent the other party as a single agent.

The disclosure requirements for agency are fairly simple.

If I’m going to be a single agent I need to disclose to you “prior to or at the time I provide specific assistance to you” that I represent you as a single agent either as a seller or a buyer. This disclosure can be made verbally or in writing. If it’s made verbally then it needs to be reduced to writing prior to you signing an offer to purchase.
If I’m going to be a dual agent, I cannot act as a dual agent until I disclose to you, that I will be acting as a dual agent and that disclosure must be specific to the property I am either selling for you (if you’re the seller) or the property I am selling to you (if you’re the buyer).
If I’m going to be an appointed agent then the disclosure needs to be made prior to me providing specific assistance to you.
SO WHAT’S THE BEST POLICY?

In my opinion the best policy, for any real estate company, is to disclose the type of agency relationship that will exist between an agent and his client or customer at the first meaningful meeting the agent has with his client or customer and that the disclosure should be in writing at the time that disclosure is made.